Weekly North America News

Group: Chintan, Tarun, Disha, Shubham

Tuesday 22nd Aug

Stocks blasted off out of the gate, with the Dow up 100 points and the S&P rising over 0.5%, and the VIX
getting clobbered following an early morning report from Politico that "Trumps top aides and
congressional leaders have made significant strides in shaping a tax overhaul, moving far beyond the six-
paragraph framework pushed out in July that stoked fears about their ability to deliver on one of the
GOPs top priorities."

Wednesday 23rd Aug

U.S. new home sales unexpectedly tumbled in July, causing concern over the health of the real estate
market, official data showed on Wednesday.
In a report, the U.S. Commerce Department said new home sales fell by 9.4% to a seasonally
adjusted 571,000 units in July from the prior months revised reading of 630,000 (initially 610,000).

Analysts had expected a 0.3% increase from the previous months initial reading to a total of 612,000
units in July.

Trump Threatens Government Shutdown Over Wall Funding

Delivering a warning to Democratic lawmakers who have objected to his plans to construct a wall along
the U.S.-Mexico frontier, Trump called them obstructionists and said that it was time for the U.S. to
crack down on illegal immigration. "If we have to close down our government, were building that wall,
Trump told thousands of supporters gathered in Phoenix for a campaign-style rally. One way or the
other, were going to get that wall. As Trump spoke, S&P500 futures reversed gains to slip as much as
0.3% as Trump spoke.

Trump has asked for $1.6 billion to begin construction of the wall, with Congress under pressure to pass
some kind of spending bill to keep the government open after Sept. 30(Debt Ceiling). But Republicans in
Congress havent shown much appetite for fighting to spend potentially billions more on a border barrier
either. The funding would add to the deficit at the same time Republicans are trying to figure out how to
pay for tax cuts

The 'risk-off' trade was evident everywhere with Treasury and Bund yields tumbling, gold up, and USDJPY
sliding.
Bond yields tumbled - erasing all of Tuesdays losses(reason :expected tax reform) - Gold was back at
Tuesdays highs, and the dollar leaked lower

P.S. Tuesdays gains were fueled by Politico's report that Trump is unexpectedly "making strides" on tax
reform
AUG 24-26 (Jackson Hole and other data)

Existing Home sale: U.S. existing home sales unexpectedly fell in July, dampening optimism over the
health of the housing market, according to a report released on Thursday by the National Association of
Realtors (NAR).
The industry data showed that home resales unexpectedly decreased by 1.3% in July to a seasonally
adjusted 5.44 million units from 5.51 million units in the previous month. Junes data was revised down
from an initial reading of 5.52 million units.

The consensus forecast was for a 0.9% increase Junes initial reading to 5.57 million units.

The data helps to gauge the strength of the U.S. housing market and is considered to be a key indicator of
overall economic strength.

Jobless Claims: The number of people who filed for unemployment assistance in the U.S. last week rose
less than expected, according to official data released on Thursday.
The number of individuals filing for initial jobless benefits in the week ending August 19 increased by
2,000 to a seasonally adjusted 234,000 the Labor Department said. Analysts had expected claims to rise
to 238,000 last week.

Core Durable Goods: U.S. orders for long lasting manufactured goods fell more than forecast in July,
although the core reading rose slightly more than expected, casting a mixed picture over the U.S.
economy, according to official data released on Friday.
Total durable goods orders, which include transportation items, decreased by 6.8% last month, the
Commerce Department said, compared to economists' expectations for a decline of 6.0%.
Junes orders had registered a gain of 6.4%.Durable goods are typically bulky or heavy manufactured
products designed to last at least three years.
Core durable goods orders, which exclude volatile transportation items, rose by 0.5% last month,
compared to forecasts for a 0.4% gain.June's core durable goods orders had registered a 0.1% advance.
Durable orders excluding defense tumbled by 7.8% in July, compared to the prior months 6.4% decrease
which was revised downwards from an initial 6.6% advance.Durable goods excluding defense and
aircrafts advanced by 0.4% in July, compared to expectations for a 0.3% gain.
The previous month had registered a drop of 0.1%.
 Jackson Hole key Yellens speech takeway

o Feds Janet Yellen said more resilient, post-crisis U.S. financial system is better prepared to absorb,
rather than amplify, adverse shocks, yet there is more work to do and we can never be sure that new
crises will not occur.
o Policy makers, investors should continue to monitor indicators of financial-system resilience, Yellen said
Friday in text of speech at Kansas City Feds annual symposium in Jackson Hole, Wyoming.
o All-too-familiar risks of excessive optimism, leverage, and maturity transformation will re-emerge
sooner or later in new ways that require policy responses, given technology, regulation and evolution of
financial system
o Market-based measures may not reflect true risks; supervisory metrics are not perfect, either
o Evidence shows that post-crisis reforms have made the financial system substantially safer
o Credit default swaps for large banks suggest market participants are assigning low odds to distress of a
large U.S. bank
o Market-based assessments of the loss-absorbing capacity of big U.S. banks have moved up, and measures
of equity now in range of book estimates
o Market liquidity for corporate bonds remains robust overall
o Healthy condition of the market is apparent in low bid-ask spreads, large volume of corporate-bond
issuance
o Even so, liquidity conditions are clearly evolving; some regulations may be affecting market liquidity
somewhat; may be benefits to simplifying parts of Volcker rule
o New regulatory framework has made dealers more resilient to shocks; any adjustments to framework
should be modest
o Broader set of changes may deserve consideration, such as simplifying regulatory changes for
small/medium-sized banks
o Not altogether surprising to see conflicting research results on effects of capital regulation on credit
availability
o Credit may be less available to some borrowers, even if its not readily apparent that there are material
adverse effects of regulation on broad lending measures
o Credit appears broadly available to small businesses with solid histories

Link for full speech:

https://www.federalreserve.gov/newsevents/speech/yellen20170825a.htm

Jackson Hole full list and remarks

https://www.kansascityfed.org/publications/research/escp/symposiums/escp-2017

Politicos report: http://www.politico.com/story/2017/08/22/trumps-team-and-lawmakers-

making-strides-on-tax-reform-plan-241873